Types of CG Approach
Rules based approach - (SOX)
Comply or pay penalties
Syllabus B3b
Summary of Approaches 2 / 10
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Types of CG Approach (2)
Principles based approach -UK Corporate Governance Code
Comply or explain
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Types of CG Approach (2)
Principles based approach -UK Corporate Governance Code
Comply or explain
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Rules based - Characteristics
CLARITY
The rules set out a very clear defined pathway to fulfill corporate governance requirements.
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Rules based - Characteristics
CLARITY
The rules set out a very clear defined pathway to fulfill corporate governance requirements.
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Rules based - Characteristics
STANDARISED
The rules based approach ensures that everyone is clear in what is required.
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Rules based - Characteristics
STANDARISED
The rules based approach ensures that everyone is clear in what is required.
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Rules based - Characteristics
BINDING
The rules are binding, you have to comply or pay penalties.
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Rules based - Characteristics
BINDING
The rules are binding, you have to comply or pay penalties.
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Rules based - Characteristics
DETERENT!
As there is no option to comply or explain it should deter non compliance.
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Rules based - Characteristics
DETERENT!
As there is no option to comply or explain it should deter non compliance.
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Rules based - Upside
Following a rules based approach (SOX) will improve investor confidence.
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Rules based - Upside
Following a rules based approach (SOX) will improve investor confidence.
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Principles based - Characteristics
Its not law, its a set of principles for guidance thus should lead to less loopholes.
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Principles based - Characteristics
Its not law, its a set of principles for guidance thus should lead to less loopholes.
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Principles based - Characteristics
Its not a "box-ticking" exercise which should lead to more flexibility
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Principles based - Characteristics
Its not a "box-ticking" exercise which should lead to more flexibility
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Principles based - Characteristics
Due to greater flexibility this will lead to a more cost effective approach.
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Principles based - Characteristics
Due to greater flexibility this will lead to a more cost effective approach.
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Principles based - Possible downside
With the option to comply or explain
Investors will be less confident if companies are constantly "explaining" non-compliance
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Principles based - Possible downside
With the option to comply or explain
Investors will be less confident if companies are constantly "explaining" non-compliance
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